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Waiting for the Last Dance -- Jeremy Grantham



  • +1 Hank How does TSDLX differ from PRWBX ? TSDLX has 27% foreign vs PRWBX 16% . NTF at Schwab, but tf at Fidelity.
  • edited February 2021
    carew388 said:

    How does TSDLX differ from PRWBX ? TSDLX has 27% foreign vs PRWBX 16% . NTF at Schwab, but tf at Fidelity.

    H Carew - I’ll dare to guess here based on recollection.

    I believe PRWBX is focused a bit shorter on duration (1-3 years). TSDLX appears to be targeting the 3 year range - give or take. Hard to know for sure because TSDLX has only been open about 6 weeks.

    By prospectus TSDLX is allowed to invest something like 30% in junk bonds - though they’re not planning to go that high. PRWBX is for the most part investment grade.

    So, under “normal” conditions (HA) you’d expect TSDLX to do a little better.
  • this tread seems to be wandering off the title, but here is a good reason to question Grantham's advice. I love his pieces and read them regularly, but he has been wrong for a long time
  • It comes down to whether one believes that stocks move on business and economic fundamentals or not. There is ample evidence that stocks can move on pure sentiment having nothing to do with valuation, economic outlook or anything really but mania for quite some time. The value of listening to Grantham is he grounds one in some form of numerical reality. Whether the sentiment-moving market agrees with that fundamental numerical reality or not is another thing entirely.
  • I think that if Mr. Grantham left out the fear predictions of market collapse and just conveyed his concerns folks might just be more willing to absorb and consider his thoughts and advice.
  • edited February 2021
    I "love" Grantham/GMO predictions

    12/31/2020 (link) 7 year prediction were: US LC will make 0.4% + 2.5% = 2.9% annually. EM will make 4.1%+2.5% inflation=6.6%. The real results(link) show SPY=13.65 annually EEM=1.9% annually

    2012(link): "Jeremy Grantham Warns 2013 Will Be A Dangerous Year For Stocks". 2013 results: VFIAX 32.3%.

    2015(link>): "GMO founder Grantham says markets ‘ripe for major decline’ in 2016". The results: +11.9%

    Why do they keep listening to him? Panic and bad news sell....wait, I know, one day the market will crash, what a story.
  • (LB) >> Whether the sentiment-moving market agrees with ... fundamental numerical reality

    I would say that has been conclusively shown
  • edited February 2021
    @DavidRMoran Elaborate. I've seen in the past charts that show over the long-term market moves match that of earnings growth and valuations or somesuch, but I've also seen evidence in the past that the variances with those fundamentals can be great over shorter periods of time. I'm not even sure anymore if that old cliche of the market being a voting machine in the short-term and a weighing machine in the long-term is completely true. In fact, a long time ago, I looked up that quote from Ben Graham in his original textbook and he didn't quite say it like the way it is commonly repeated today. In other words, I think the market can be a voting machine quite a lot. I haven't since hunted down the original quote from the primary text. Kudos to anyone who finds the actual original Graham quote, not just paraphrased from a secondary source, and provides it here, as I haven't read the original in a long time!
    Actually, I found it and it's in a book Graham and Dodd wrote called "The Relationship of Intrinsic Value to Market Price." Here's what they said: "In other words, the market is not a weighing machine, on which the value of each issue is recorded by an exact and impersonal mechanism, in accordance with its specific qualities. Rather should we say that the market is a voting machine, whereon countless individuals register choices which are the product partly of reason and partly of emotion."
    It is funny and ironic that their statement has been reinterpreted to the market is a weighing machine in the long-term. I think there may be evidence that emotion/sentiment rules the day. I assume efficient market theorists would disagree. But the efficient market theory took a real beating in 2008. I'm not much of a fan. Nor, interestingly, is Grantham.
  • meant the sketchiness of the correlation; sorry

    yes about emotional popular voting (coupled with perception of other judges' assessment, as someone said of this first-derivative beauty contest)
  • beebee
    edited February 2021
    Podcast interview with Jeremy Grantham (Invest Like the Best):

  • The Boy Who Cried Bubble
    Based on his words, Grantham is predicting that U.S. stocks will be below where they were in the summer of 2020 at “some future date”. When Grantham penned this prediction (January 5, 2021), the Dow was at 30,200. The lowest the Dow got during the summer 2020 was about 25,100 (17% lower than 30,200).

    This means that Grantham was calling for at least a 17% (or larger) correction at some point in the future. If we picked a random trading day since 1915, what’s the probability that the Dow would be down 17% (or more) at some point in its future?


    Grantham’s prediction is no better than a coin flip. How’s that for intellectually demanding?
    Nick Maggiulli Article:
  • edited March 2021
    Can’t take much more of Grantham - be he right or wrong. Bloomberg continues to re-air that interview weeks after it first appeared. However, I have the greatest respect for economist Henry Kaufman (whom those over 60 may remember). When Louis Rukeyser selected “three of the most influential financial voices of the past quarter century” for his show’s 25th Anniversary program in 1995, Kaufman was among the 3 guests (the other 2 being Sir John Templeton and Peter Lynch).

    Extended excerpt from Randal Forsyth’s always first-rate colum appearing in this week’s Barrons’s (March 15, 2021):

    Dr. Doom’s Latest Warning ...

    “Henry Kaufman earned that moniker in the 1970s and 1980s as the hugely influential chief economist of Salomon Brothers, then the reigning bond kings of Wall Street. Along with his fellow nonagenarian ... former Federal Reserve Chair Alan Greenspan, Kaufman is back issuing jeremiads about the current state of the financial and economic world. .... In a speech on Wednesday evening to the National Economists Club (Kaufman asserted) that financial innovations, such as securitization, have mainly spurred an explosion of debt, much of it for speculative purposes.

    “As the quantity of credit has exploded, its quality has fallen, Kaufman continued. As with everything else, globalization and technology also have transformed financial markets. Deregulation fundamentally changed the structure of the financial worlds from the era of clear divides between commercial and investment banking and government-set interest-rate caps. Regulation has been insufficient to balance ‘entrepreneurship and fiduciary responsibility,’ he added, which was checked when Wall Street firms were partnerships, with partners’ net worth on the line, a concept that is being rediscovered by some academics.”

    Other take-aways from the article:

    - Kaufman’s remarks re corporate bond liquidity are very incisive. (He doesn’t think there is much).

    - He notes an alarming concentration of financial wealth / influence in a very few “too big to fail” institutions.

    - His remarks re the Treasury and the Federal Reserve being “joined at the hips” are telling.

    - The article’s overall take-away is that Kaufman, who previously called the bond bull market, now sees a reversal of the trend leading to a long term bear market in bonds. I’d have to re-read the article again, but I think he sees inflation increasing and stocks stagnating or falling as a result.

    Disclosure: Kaufman recently published a book on the topic.

    You might be able to access the article with the following link. If not, the magazine’s a great value at almost any price - ISTM. March 2021 Dr. Dooms Warning&ia=web

  • JPond's two cents:

    A lot of this sounds like wishful thinking, imo,

    also as if a certain self-awareness makes an important difference

    ('And though she feels as if she's in a play, she is anyway' --- PMcCartney, Penny Lane)
  • edited June 2021
    I just revisited Grantham's January 5 article. His best guess at that time:
    My best guess as to the longest this bubble might survive is the late spring or early summer, coinciding with the broad rollout of the COVID vaccine. At that moment, the most pressing issue facing the world economy will have been solved. Market participants will breathe a sigh of relief, look around, and immediately realize that the economy is still in poor shape, stimulus will shortly be cut back with the end of the COVID crisis, and valuations are absurd. “Buy the rumor, sell the news.”
    According to Grantham, it's time to look around (and bail).

    So, I'm looking around. The economy is in much better shape than I expected it to be at mid-year and its potential appears brighter than I expected. The Fed and other central banks are continuing to be supportive. And, there is momentum behind an infrastructure bill that has the potential to provide substantial long needed investment in the backbone of the country. Are valuations really likely to collapse in the near future based on valuations being "high"?

    One of today's headlines:

    Haters everywhere in stock market after S&P 500's big first half

    A few brief excerpts from that Bloomberg article:
    ...the S&P 500’s 14 per cent rally (is) putting it on course for its second-best January through June period since 1998.

    In the 27 years when gains in equities were this strong through the first six months, three-quarters of the time stocks continued to march higher by December.

    ...pushing against the wall of worries are the growing numbers of retail traders who bought the dip during the pandemic bear market and have since become the staunchest allies of this bull market.

    The trade-off households face between equities and other asset classes favors equities through year-end given anemic money market and credit yields
    I plan to continue harvesting year-to-date gains to restrict my risk exposure.....if the market continues to offer them (that process has provided a substantial boost to my "rainy day" cash on hand so far this year). But no significant other trimming is in the offing....

    Is anyone looking around and deciding to bail or to substantially reduce their risk exposure?

  • edited June 2021
    “Is anyone out there looking around and deciding to bail or to substantially reduce their risk exposure?”

    In short - Not here.

    I agree things look bubbllish. But how you react depends on your initial positioning, as well as how diversified you are (plus lots of other factors). I try to look at “worst likely downside” for things I own. If I’m comfortable with that, than fine.

    Probably more troubling than that initial downside, would be the persistency or length of the downtrend. A 7% yearly loss for 5 years would hurt more than a one year loss of 20% followed by some up years.

    Was glad to get a second chance to add a bit to my mining fund at Invesco this week. NAV fell back down to where it was 3-4 months ago. I did bail from PRAFX couple weeks ago (and it’s continued rising). Shifted that to a good global infrastructure fund. But that’s related to my outlook on the two sectors rather than a fear of markets in general.

    FWIW - Watching the charts … energy & broad based commodities look high, Value looks decent - but a lot of “hot” money’s been moving in this year. I wouldn’t add to it if already exposed. . Small caps have been bid up by the fanatics at Robinhood. EM is probably good longer term but may go down before up. Some observers I watch like EM bonds better than equities. I think the dollar will weaken. But I’ve been mostly wrong on that for years.

    At this point it’s largely about gaming the central banks (and Fed) and anticipating how long they might allow a steep market slide to persist. My firm belief is they will continue to flood markets with easy money if necessary to keep the ship upright. (That doesn’t mean we can’t see a 20+% selloff in some equity markets nearer term. )

  • edited June 2021
    Is anyone looking around and deciding to bail or to substantially reduce their risk exposure?
    No. In fact I just bought into a Chilean electricity company. All the numbers and Analyst projections look good for that stock. SOMEONE'S been shorting the little booger ever since I bought-in, though. ORK! It's a tiny position. "Play money."

    (hank:) "I agree things look bubbllish. But how you react depends on your initial positioning, as well as how diversified you are..."

    I'm standing pat. And sitting pretty. I've not put anything into the IRA in the past few years. No earned income. So, letting it ride. The only activity is in my PTIAX. It grows, then after a while there's always a reason to "steal" from that fund, so it must grow back over time. But hey, it's just money. I'm as diversified as I want to be. My allocations are always a work in progress. For example, I'd prefer to own a bit more bond-ballast, but the Fund Managers have me in a bit (just a bit) more CASH than I'd prefer. My investing horizon extends beyond my own earthly existence. If someone has a magic pill to offer me, in order to get wifey to understand that, I'm ready. :)
  • edited July 2021
    It feels like the market's current worries are beginning to test Grantham's "sell the news" theory.

    Wall Street’s New Fear Is That the Economy Has Already Peaked

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